SRINIVASA ENTERPRISES & ORS. versus UNION OF INDIA ETC.

Citation: [1981] 1 S.C.R. 801 · Decided: 24-09-1980 · Supreme Court of India · Bench: V.R. KRISHNA IYER · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

l 
SRINIV ASA ENTERPRISES & ORS. 
v. 
UNION OF INDIA ETC. 
24th September 1980. 
[V. R. KRISHNA IYER, R. S. PATHAK AND 0. CHINNAPPA REDDY, JJ] 
Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (43 of 
1978) & Constitution of India 1950, Arts. 14, 19(1) (g) and List lll Entry 7-
Parliament whether competent to enact legislation-Act whether constitutionally 
.m/id. 
Constituiion of India 1950, Art. 32-Petition under-Court's function not 
to give advisory opinion. 
Prize Chits are ·one type of saving schemes. In Prize Chits the organiser 
collects subscription in one lump sum or by monthly instalments spread over 
a specified period from the subscribers to the schemes. 
Periodically, the num-
bers allotted to the members holding the tickets or units are put to a draw 
and the member holding the lucky ticket gets the prize either in cash or in 
the form of an article of utility, such as a motor car, scooter etc. 
Once a 
person gets the prize, he is very often not required to pay further instalments 
and his name is deleted from further draws. 
In case members do not get 
any prize, the schemes usually provide for the return of subscription paid by 
the members with or without an additional sum by way of bonus or premium 
at the end of the stipulated period. 
As the flood of funds flowing through these 'prize chits benefited only 
the organisers of such schemes, and the total number of people victimi~ed 
by these projects were considerable and injury to the community substantial, 
the Central Government set up a Study Group which went into the operation 
of these schemes. 
The Report of the Study Group demonstrated the many 
sinister effects and also exposed the anti-social impact upon the community 
by the operation of such schemes, and recommended to the State to intervene 
and interdict. 
The Central Government thereupon undertook legislation for curbing the 
effect of the operation of these schemes by enacting the Prize Chits and Money 
Circulation Schemes (Banning) Act, 1978. 
The petitioners in their writ petitions under Article 32 of the Constitution 
assailed the aforesaid statute : (1) contending that a package of proper safe-
guards would adequately protect the community, a total ban. being recklessly 
excessive, unintelligently over-broad and, therefore, unconstitutional, under Arti-
cle 19(1)(g), (2) conventional chits and prize chit~ are substantially similar and, 
therefore, permission to continue 'conventional chits' and prohibition of prize 
chits was discriminatory under Article 14, (3) there is a discriminatory exemp-
801 
A 
B 
c 
D 
E 
F 
G 
H 
802 
SUPREME COURT REPORTS 
[1981] 1 S.C.R. 
A 
tion from the operation of the prohibition in regard to those categories of 
prize chits which fall within section 11, and (4) the legislation being aimed at 
prize chits and intended to ban lotteries, would fall within the State List, 
Entry 34 List II and Parliament cannot enact such a law under Entry 7 of 
List III. 
B 
c 
D 
E 
F 
G 
H 
Dismissing the writ petitions, 
HELD : (1) (i) There is a sufficient justification for undertaking legislation 
restricting the freedom to fleece through prize chits. 
[8 IOE]. 
(ii) The legislation cannot be struck down on the score of Art. 19(1)(g} 
of the Con~titution. [8 I IF] 
(iii) The requirements of Art. 19(6) are, the reasonableness of the restric-
tion upon the fundamental right to trade, the measure of reasonableness being: 
the compelling need to promote the interest of the general public. 
[SIOH] 
2. Conventional chits and prize chits are different categories with different 
financial features and different damaging effects. There is, therefore, no force· 
in the plea of violation of Article 14. [812A] 
3. A bare reading of section 11 makes it clear that the exempted cate-· 
gories do not possess the vices of private prize chits. 
What .are exempted 
are prize chits and money circulation schemes promoted by or controlled by 
the State Governments, the Central Government, or the State Bank of India 
or the Reserve Bank. 
Even Rural Banks and Cooperatives covered by s. 11,. 
are subject to public control. 
Charitable and educational institutions 
are· 
exempted only if they are notified by the State Government in consultation· 
with the Reserve Bank. There is, therefore, sufficient justification to justify the 
different classification of these items and their exemption cannot be called in 
question on the ground of violation of Art. 14. [812G-H; 813A] 

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